After a period of largely consistent and robust returns since the Covid pandemic, equities have seen a correction in October. Navneet Munot, MD and CEO of HDFC AMC tells Vivek Kumar M that this is a healthy correction, with unsustainable pockets seeing sharper cuts. He says the period of easy money-making is now likely behind equity investors. Excerpts:
Equities have given one of their best returns in a decade in Samvat 2080. Given the major events that we had back home and globally, what does this tell us about Indian equities?
Samvat 2080 has been another spectacular year for wealth creation for domestic investors in Indian markets. Despite the last year being witness to multiple important developments including worsening global geopolitics and volatility stemming from domestic general elections, the market delivered strong returns. This was largely a consequence of continued macro resilience and domestic liquidity.
Samvat 2080 has been a great year, but things are not looking as good currently. What would your recommendation be for Samvat 2081?
Yes, the past couple of months have seen some reversal in sentiments. The primary driver of the market correction has been a sharp pullout of FPI money in October. However, the underlying drivers were also fundamental with overall market valuations running a bit ahead of fundamentals and multiple pockets of valuation froth emerging. In this context, the correction has been a healthy one with higher corrections being seen in more unsustainable pockets. As investors, it is important to retain the long-term focus, and such market drawdowns provide more reasonable valuations to step up investments.
Unlike in the last few years, we have not seen a quick recovery in the market this time. How much could this impact retail fund flows coming into the market in your view?
Market performance always moves in cycles accentuated by sentiment excesses on either side. However, the financialisation of the domestic savings pool is a structural tailwind. Rising income levels along with low equity ownership provide a large headroom for domestic retail flows. The maturity displayed by retail investors and the coming of age of the entire investment advisory ecosystem suggests to us retail flows in the form of SIPs should remain robust.
The broader market has been a clear outperformer in the last few years. Looking at the current market sentiments and earnings momentum,
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